kodokan

So things are ticking along nicely on building a life in the US. We've been here a little over a year, got our Green Cards last week, and are in the process of buying a house.

Once we're settled there, we're going to look into making a will. We have one in the UK, but it's from a decade ago and we reckon it needs updating in light of our move, rethinking the kids' guardians now they're older, etc.

We shall have the equity in the house in the US along with personal possessions, money in bank accounts, and hubby's 401(k) and HSA accounts. There would be a lump sum of US life insurance.

We also have UK accounts with fairly trivial sums in them, and UK life insurance (they know we no longer live in the UK, and are fine with the insurance still being valid as long as we don't live in the sort of country that has a Foreign Office travel warning on it).

This would all come in under the US Estate Tax threshold, so no issues there.

If we both died, the kids (currently 13 and 9) would go to one of several relatives in the UK; their US life would be closed out and they likely wouldn't live here again. We would want all our wealth to go to them, but in trust. We would want whoever their guardian is to have access to the trust to use for the kids' benefit (they would probably need to buy a larger house, a bigger car, pay for education, etc) but not to be able to 'accidentally' spend on their own interests; we have a couple of perfectly lovely relatives who would make fabulous and loving guardians APART from their generally poor money management skills.

I have no clue who to talk to about this, or what questions to ask of them. I can't even begin to imagine how one goes about setting up a trust based on US assets to be administered for a potential future UK life. I'm thinking the trust would need to be established in the UK, and that the whereabouts of the initial assets (which would be moved to the UK and denominated into sterling) are neither here nor there. Trustees would likely be my BILs, who are both in the UK.

How's everyone else dealt with this sort of thing?

ian-mstm

I don't think children are considered property, so they don't go someplace without due process via the US court system. While you can certainly set up a trust for their benefit, it's not a given that they'll automatically end up in the UK. Discuss this with your attorney - because the laws of your state will likely determine what can and can't be done.

Ian

kodokan

Seriously?!! You're saying we can't even specify guardians?! That's ridiculous - they're British Citizens with a gaggle of British relatives specified in a legal will who'd fly over to the US, collect them, and take them in. It can't possibly be that they'd go into the US care system, at least not past the 24 hours it'd take the relatives to get here, and our family members have no US residency, so they would take the kids back to the UK.

B***dy fantastic - I thought it was just the money that'd be complicated.

Michael

Guardianship can be part of the will.

You should name one personal guardian (and one alternate, in case your first choice can't serve) for each of your children.

http://www.nolo.com/legal-encycloped...ren-30227.html

I suspect the biggest problem will be to indicate in the will how to setup the trust and appoint a trustee. If the parents who are the guardians are appointed as the trustees, there may not be any money left for the children by the time they have unlimited access to their share of money in the trust. If a professional is used, expect large monthly fees and a large fee every time a check is written to the parents.

If possible, I would place the trust in the hands of an investment banker for investing purposes only with the stipulation that an initial lump sum and a monthly fixed amount of money (inflation indexed) be paid to the guardians of your children. Several issues could arise when the children need a car or money for a university prior to having unlimited access to their share of the trust so there may also be a clause in the will to handle situations such as those.

Also how taxes will be processed for profits made in the trust will have to be considered such as can the profits be considered as income to the children producing a low amount of taxes owed?

So you will need someone who is very good at writing wills to handle all the situations.

JAJ

Yes, seriously - you can't "leave" your children to someone like you can do with property. That's not to say your wishes won't be taken into account, but they will not be definitive. The court system in your state will have the final say. But do check the specifics of Arizona law with a local attorney.

For example: If you both were to die three years down the line, your children - then at ages 16 and 12 - might prefer to remain in the United States and there might be people in your circle of friends in the U.S. who would be willing and able to look after them.

Michael

Of course either the children, some "do gooder", or possibly some greedy person would have to hire an attorney to challenge the requested guardianship before the courts would even consider such a request.

The only time I ever heard of that happening is when someone has a very large estate such as the case of Anna Nicole Smith’s baby where several people including Zsa Zsa Gabor's husband tried to claim custody to acquire access to the hundreds of millions of dollars in the estate. Or the squabbles in the Michael Jackson's family over custody.

JAJ

Would need to see AZ state law to be specific, but in general ...

The point I'm making is that nothing regarding guardianship flows automatically from a will. The courts have to make a decision either to go along with wishes expressed in the will, or make a different decision. While it's clear that they would probably go along with the will in normal circumstances, in a situation where circumstances had changed since the will was made (such as children becoming older and being able to speak for themselves), the decision could be different.

kodokan

Ahhh, I see. Makes sense when you explain it in terms of older kids; I'd only really thought of them being 'children' who'd go where they were put. Oh well, we'll try not to die until our oldest is at least 18, then...

JAJ

It's highly unusual for both parents to die simultaneously. However, what you're doing in terms of trying to put together good guardianship arrangements is very responsible and I don't want to appear critical in that respect.

Perhaps the best thing to do is to put down your wishes, but note that if your children are of age to express their own views, then you are also ok for that to be taken into consideration. Discuss with attorney, etc.

Something else to be aware of - the United Kingdom Inheritance Tax applies to all those with a U.K. "domicile". If you have acquired permanent residence in the United States, and have settled permanently in Arizona, then you should normally have acquired an Arizona domicile (as far as U.K. law is concerned), as long as you're not doing something that suggests an intention to return to the U.K. at a future date. Divesting of your U.K. assets is another strong indicator of losing domicile. Unfortunately, the U.K. law continues to treat you as U.K. domiciled for another three years (for Inheritance Tax purposes), although if the estate is entirely probated in the United States it's hard to see how that could be enforced.

kodokan

Probably alright with this, as we left the UK in 2008 and lived in Switzerland from then until moving here in 2011. All the assets we have in the UK are a couple of 'pin money' bank accounts that we keep for visiting convenience, and a couple of pensions we can't move. Whereas in the US we'll have a house, bank accounts, 401(k), job, kids in school, Permanent Resident visas, etc... it would be easy to argue that the centre of our permanent and ongoing lives is AZ.

Tegwyn

Please consider a trust rather than a will. The probate process can take quite a long time to settle. We changed ours from a will to a trust for that reason as well as the tax issue. Our lawyers advised us that if we had only been green card holders, estate taxes would have taken a sizeable whack simply because it is assumed assets would be taken out of the country. In that time we had become US citizens which changed that tax structure. In terms of children, our lawyers had advised us to set up temporary guardianship to close friends in the US until our family members established custody. We had legal papers for guardianship drawn up in the UK as well as in the US to ensure our kids were protected. Fortunately my children are grown adults now so those issues did not have to be addressed. However a friend of mine passed a few years after her spouse had died of cancer, and the children lived with friends (temp. guardians) for a short term until family from the UK came to get them. The kids were in their teens so also had some say in their choices. The process seemed to go rather smoothly although the processing of her will is still dragging on. Finding a lawyer with international family law experience is the way to go.

JAJ

A trust is not an alternative to a will. Usually, a trust is set up following a will. Either way, you still need a will.


As far as I am aware, the only difference not being a U.S. citizen (as opposed to a green card holder) makes is that the unlimited spouse exemption doesn't apply. But the threshold for federal estate tax is $5m so for most people, this has no relevance.


Did a lawyer really advise something otherwise? It would be interesting to see the reasoning. Perhaps I have missed something.

Except that advice from that kind of lawyer is likely to cost thousands and is not for everyone. And unless that lawyer is admitted in your own U.S. state such advice may not be worth a great deal.

I suggest not to over-complicate matters.

Michael

Are you referring to a "living trust"? There isn't any difference in taxes between a "living trust" with a will that just points to the living trust to determine how assets will be divided and a traditional will.

I've considered a "living trust" but decided against it since my will is simple so probate should be very fast and easy but a living trust can possibly be ruled invalid or possibly accessed immediate tax consequences if it is not maintained properly (home is sold, banks accounts are changed, tax deferred pensions put into a living trust can possibly have immediate tax consequences, etc.).

The biggest advantage of a "living trust" is if you want to avoid probate but if all the assets are equally divided between your children, probate shouldn't be a major issue. However even a "living trust, that can be contested and forced into probate just like a traditional will.

Tegwyn

We have just had our trust re-adjusted by our lawyer and he was very clear on having a trust versus a will. The tax implications for a non-citizen versus a citizen were quite high but I don't recall the exact percentage, as I understood it, that has nothing to do with the $5 mil cut off. We have a meeting again on the 28th and I will ask him once again to clarify that for me. I will produce exact amounts then.
In terms of complicating things, well, when it comes to my kids, we ensured their wellbeing would be met. Sometimes the cost of a good lawyer is worth the headache to ensure protection of your loved ones should an unfortunate event occur.

If you are telling me something different here, I will ask our lawyer these questions as to why he seems so insistent on this directive.

JAJ

A living trust may allow assets to pass without probate, but you normally need a will anyway to deal with assets not covered by the trust.

The probate process doesn't have to be all that difficult but it depends on circumstances, state etc.

Once again. As far as I am aware, there are no estate tax differences (other than the lack of an unlimited spousal exemption) whether you are a citizen or green card holder. So as long as your estate is under $5m there should be no federal estate tax to concern yourself about. But this is a free forum and perhaps your lawyer knows something else - you should ask and get advice in writing.


The problem with complicating things is that it can cost extra dollars and not necessarily help with your objective.